Mirae Short Term Debt Fund, as the name indicates, is a short-term debt fund offering from Mirae Asset Management that will close on 9th March 2018. The fund is an open-ended fund and hence investors can buy it after launch as well.
The Investment Objective
It is one of the first funds whose mandate incorporates the SEBI category guidelines on short-term debt funds. These guidelines say that short-term debt funds must have a portfolio of debt and money market instruments with a Macaulay Duration of 1-3 years. Macaulay Duration is the weighted average maturity of cash flows from a bond or bond portfolio. It is a measure of the sensitivity of the price — the value of principal — of a fixed-income investment to a change in interest rates. (Bond prices have an inverse relationship with interest rates.)
It can also be converted into ‘Modified Duration’ which tells you the percentage change in a fund’s portfolio for a percentage change in interest rates. For example, a Modified Duration of 3 means that a one percent rise in interest rate will cause the portfolio to drop by 3%.
The scheme can also invest up to 10% of its corpus in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs)
With interest rates on their way up, short-term debt funds may well be the best place to be for debt investors who want a little more return than liquid funds and have horizons up to three years. SEBI’s new classification system has also straitjacketed these types of funds protecting investors from excessive interest rate risk. Credit risk is also another factor to watch out for, especially in the wake of recurrent lending scams such as the recent PNB scandal.
There is little advantage to be gained from investing in an open-ended debt fund at NFO stage. You can buy into the fund at any time after launch.
The fund manager, Mahendra Kumar Jajoo is the head of Fixed Income at Mirae, managing its debt funds overall. He joined Mirae in August 2016. He has over 25 years of experience in financial services and was the Chief Investment Officer at Pramerica Asset Managers from 2010 to 2014. He also manages Mirae Asset Savings Fund, Mirae Cash Management Fund, Mirae Asset Dynamic Bond Fund and the debt portions of Mirae Asset Prudence and Tax Saver Funds.
The Scheme Details
NFO Period: 23rd Feb to 9th March 2018
Plans: Regular and Direct
Options: Growth, Dividend Reinvestment, Dividend Payout
Benchmark Index: Crisil Short Term Bond Fund Index
Minimum Investment: Rs 5,000
Exit Load: 0.25% for redemptions within 30 days of investment. Nil thereafter.
Fund Manager: Mahendra Kumar Jajoo.